The biggest risk in retirement usually isn't running out of money. For retirees with a million dollars or more, the opposite is far more common. Most of them die with more than they retired with, and a meaningful share end up with five times as much. The regret shows up later, in the years when their bodies still worked and they held back because the math felt scarier than it was.
The consumption gap
Academics have a name for this. The consumption gap is the difference between what your portfolio could safely support and what you actually spend.
A study published in the Journal of Financial Planning measured it across the top twenty percent of wealthy American households, defined roughly as households with $700,000 or more in financial assets. They spent about half of what they could have safely withdrawn.
The time period is the interesting part. The researchers ran the data from 2000 through 2008, the dot-com crash and the housing crisis, the worst eight-year stretch this generation of retirees has lived through. Those households were spending and withdrawing the entire time, and their assets grew anyway.
The math behind it
Michael Kitces ran an analysis of the historical record going back to the 1870s, 115 simulations spanning two world wars, the Great Depression, 1970s stagflation, the dot-com crash, and 2008.
Only one in ten of those retirees would have ended up with less money than they started with. Roughly two-thirds finished 30 years with double their starting wealth, and about 16% ended with five times or more. The median outcome across all 115 simulations was 2.8 times the starting wealth. Withdrawing 4% a year for 30 years through real events, the most likely result is that you end with nearly three times what you began with.
Recent data says the same thing. In 2018 the Employee Benefit Research Institute used the Health and Retirement Study, which tracks the same households over decades, to look at retirees with $500,000 or more in non-housing assets. Over 20 years, those retirees touched about 12% of what they started with. The consumption gap is the most common outcome in retirement.
Three reasons lifelong savers won't spend
The first is loss aversion. The human brain treats a loss as twice as painful as the pleasure it gets from a gain. Pull $5,000 out of a brokerage account and it registers the same way a market drop does. The fact that the money is going toward a trip or a kitchen renovation doesn't enter the calculation in real time.
The second is identity. You spent 40 years saving money and building that balance, and your brain doesn't flip a switch the moment the paycheck stops. You built the habit of saving and never really learned how to spend and feel good about it, and that's what keeps the money locked up.
The third is structural. Advisors are generally paid on assets under management, so their fee is a function of how much you have invested with them. Take $500,000 out of that account and the advisor takes a pay cut averaging around $5,000 a year. That isn't a conspiracy, it's how the incentives line up. The effect is that some of the people you trust to tell you whether it's safe to spend have a reason to steer you toward holding more than you need.
The long-term care fear
One more thing keeps people from spending, and that's the fear of a long stay in memory care with a bill that runs for years and eats away at savings. The fear has some basis. Genworth's 2024 Cost of Care survey puts the median cost of a nursing home at $127,000 a year for a private room. Assisted living runs around $70,000 a year and an in-home aide about $77,000.
You've probably heard that 56% of 65-year-olds will need long-term care at some point. Your brain turns that into four to six years in a memory care unit at six figures a year, which isn't what the data says. Research from the Department of Health and Human Services found the median person who needs long-term care uses it for less than a year. About one in 15 needs it for five years or more, and the average lifetime out-of-pocket cost across everyone is $120,000.
That's a serious bill and it deserves its own reserve account. Setting aside a million and a half for a $120,000 bill is overkill, and the price of it is every year you didn't spend money you were never going to need.
The fix is structure
You can't tell a lifelong saver to start spending. The reason so many retirees underspend is the architecture of their cash flow. For as long as you pay your bills by selling shares, every withdrawal registers as a loss whether it is one or not, and you can't talk yourself out of that. You build a structure around it instead.
Step one is arithmetic. Add up what leaves your account every month, then add up the income that arrives every month whether or not you sell anything: Social Security, pensions, interest income, rental income.
Step two is covering the gap between those two numbers with assets that produce income. Dividend stocks are popular, and the thing to check is whether the dividend is reliable, because dividends get cut during recessions. A bond ladder gives you a fixed interest rate and periodic payments that land in your bank account. Among annuities, the one I'd go with is a multi-year guaranteed annuity, which doesn't lock up your capital forever, typically a three, five, or seven year term. Rental properties can throw off good cash flow, though they're closer to a second job. Secured mortgage notes put you in the bank's seat. You lend against a property, so there's no tenant to manage and no maintenance to pay for. Plenty of retirees use a mix, and the point is income that covers the bills without you selling anything.
Once the bills are covered regardless of the market, the money in stocks changes character. It can go up and down without feeling life-threatening, because you don't need it to live on. It becomes permission money.
There's research behind that shift. Blanchett and Fink at Protected Income compared retirees with comparable assets and found that those with guaranteed income spent twice as much in retirement. Same assets on paper, a completely different psychology about what's safe to spend.
Spend the surplus on the right things
Step three is spending the surplus, and this is the part lifelong savers don't know how to do. Start small, and put the money into quality of life instead of things. Buying back your time. New experiences. Giving money away while you're alive to see the impact it has. Improving your health. More time with the people you love. Those are the categories the research says actually improve your life. A bigger house or a fancier car doesn't.
None of this is about ending at zero. Ending well is the point. There's a real difference between pacing your money against the time you have left and leaving behind a giant surplus by accident. Writing a check for your kid's down payment on a first house, or donating to a cause you care about while you're alive to see what it does, that's what the surplus is for.
The other kind of surplus is the one that sits in the account and accumulates because spending it felt scary. That's the one that costs you. It costs you the trips you didn't take and the help you didn't give that would have changed someone's life. Those are the real regrets, and they have nothing to do with the dollar amount on your brokerage statement.